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Wireless internet broadband modem - Source: ONE News -
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The government's proposal to set up a new Crown company to oversee its $1.5 billion dollar broadband investment is now up for consultation, but there may be some hitches along the way.
The proposal to make ultra fast broadband available to 75% of New Zealand's population would see the private sector invited to partner with the government as co-investors.
"It's effectively a PPP (public private partnership)...it sees the government putting money into a vehicle which will then invest in nominally 25 regional businesses that will in turn roll out fibre to their respective areas," says Paul Winton from Temple Capital Investment Specialists.
The regional businesses will contest for contracts, one per region.
"Over the next six to 12 months we're going to see everyone really sharpening their pencils and we should see people competing to get the right team together such that they can position themselves to win," says Winton.
Telecom has welcomed the proposal, saying it supports the government's vision to deliver higher broadband speeds to New Zealanders.
But Winton says the proposal plays into the hands of the lines companies who own the infrastructure and are strongly represented in their communities, and Telecom will now be in a process of re-evaluating its strategy.
"What it effectively does is funds another guy onto their patch and then doing so raises the risk of overbuild of their existing Chorus (maintains copper and fibre) network and their existing investment," he says.
Telecom is currently rolling out $1.3 million of investment to improve New Zealand's telecommunications infrastructure as part of its operational separation agreement with the government.
Winton says the government may also create a monopoly over the broadband infrastructure.
"There is a risk that pricing will be stripped out of the market," he says.
He also says the plan faces an "investment abyss" over the next couple of years.
"As we put this money into the new infrastructure, it's not immediately obvious why anyone would continue investing in legacy infrastructure," he says.
Winton says managing the trade off from existing to new will be a critical element the government will have to manage carefully.
The government has not yet laid out a timeline for the development of the infrastructure, but Winton believes it could be a one to three-year timeline if it is approached aggressively.
"In terms of uptake of the technology by consumers, in some
places we've seen up to 80% switch over in one year, so it could
happen very, very quickly if the stars align," he says.
